{"term":{"slug":"drawdown-recovery","term":"Drawdown Recovery","definition":"The process of recovering account balance after a losing period. Drawdown recovery is asymmetric -- a 10% loss requires an 11.1% gain to recover, and a 50% loss requires a 100% gain. In prop trading, recovery must happen within the remaining drawdown room.","extendedExplanation":"Drawdown recovery is one of the most important concepts in prop firm trading because you have a hard floor that cannot be breached. If your $100K account drops to $92,000 ($8,000 loss) with a $90,000 floor, you only have $2,000 of room left -- but you still need $8,000+ to reach your profit target.\n\nThe math of recovery is brutal. After losing 5% of your account, you need a 5.26% gain to get back to even. After losing 8%, you need 8.7%. This asymmetry means that preserving capital is more important than maximizing gains.\n\nSuccessful prop firm traders often reduce position size during drawdowns. If you normally risk 1% per trade, dropping to 0.5% during a drawdown gives you more trades to recover while reducing the chance of hitting the floor. The key psychological discipline is resisting the urge to increase size to \"make it back faster\" -- this almost always leads to account termination.","exampleWithNumbers":"FTMO $100K, floor at $90,000. You lose $6,000 and sit at $94,000. Room remaining: $4,000 (4%). You need $16,000 in profit to hit the $110,000 target (10% target). With 1% risk ($940/trade) and 1:2 risk-reward at 50% win rate: expected gain/trade = $470. Trades needed: 34. If you panic and increase to 2% risk ($1,880/trade), just 2 consecutive losses ($3,760) would leave you with only $240 of room.","category":"drawdown","relatedTerms":["trailing-drawdown","static-drawdown","drawdown-floor","risk-per-trade","compound-growth"]},"_links":{"self":"https://runvigil.app/api/glossary/drawdown-recovery","page":"https://runvigil.app/learn/drawdown-recovery","allTerms":"https://runvigil.app/api/glossary","learn":"https://runvigil.app/learn"}}